Economic Integration and the Enforcement of Competition Law

1
Economic Integration and the Enforcement of
Competition Law

• Simon J. Evenett, www.evenett.com

2
The Question

• Q In what ways, if at all, does economic
  integration affect the enforcement of competition
  law?
• Causes of economic integration
• Falling tariffs.
• Lower barriers to foreign direct investment.
• Falling exchange rate volatility.
• Free trade areas and Customs Unions.
• Single Markets.
• Currency unions.
• Cheaper and more reliable international
  communications.

3
Some Factors Impeding Market Integration

• Vertical restraints in particular involving
  distributors.
• Long-term contracting.
• Closed market for corporate control.
• Differential entry requirements.
• Formal or informal rules on buying own
  products.
• Notes
• 1 and 2 are corporate acts with potential
  efficiencies. Requires careful investigation.
• 3-5 may call for competition advocacy not
  enforcement.

4
Infrastructure and economic integration

• Transportation and telecommunications
  infrastructures are an important determinant of
  the ability of firms to exploit opportunities
  created at home and abroad.
• Countries have domestic and foreign interests in
  this matter as economic integration deepens.
• Anti-competitive outcomes are rife in many
  infrastructure sectors, including
• poorly designed concessions or privatisations.
• vertical restraints.
• outright cartelisation.
• There is a clear role for competition agencies
  here.
• RTAs could include provisions to expand the
  powers of the agency in this regard and the scope
  of the competition law.

5
Cross-border Mergers and Acquisitions

• Comments on prevalence.
• Need to think of developing countries having
  offensive and defensive interests here.
• Defensive interests local subsidaries of foreign
  MNCs that merge when latter merge.
• Offensive interests fair treatment of your firms
  before government bodies abroad.
• Current examples Mittel takeover in Europe,
  Dubai Ports Case.
• Reform options
• Could have core principles of non-discrimination,
  transparency, and procedural fairness introduced
  into bilateral and regional RTAs.
• Could insist that any FTA be coupled with a
  bilateral cooperation agreement between
  competition agencies.
• Should ensure FTA does not weaken merger review.